Dropshipping for the Middle East market, how are payments resolved?

When doing Dropshipping business in the Middle East market, payment solutions need to take special consideration of local consumers' payment habits, religious and cultural preferences, and financial regulatory requirements. Below are key strategies and specific programmes:

I. Core challenges and responses

1. Low credit card penetration::

   • Average credit card penetration in the Middle East is only 351 TP3T (higher in Saudi Arabia around 551 TP3T), need to support alternative payment methods
   • Solution: Integration with local Buy Now Pay Later (BNPL) services such as Tamara (Saudi Arabia), Tabby (UAE)

2. Cash payment requirements::

   • Egypt's share of cash transactions exceeds 701 TP3T, Saudi Arabia's about 451 TP3T
   • Programme: Access to prepaid card systems such as CashU, or cash on delivery (COD) with logistics companies such as Aramex.

3. Religious Compliance Requirements::

   • Prohibition of interest (Riba)
   • Must choose an Islamic finance compliant payment gateway such as PayHalal or Islamic Bank compatible mode

II. Recommended payment mix programme

III. Technical implementation points

1. Multi-currency handling

• Shopify shops should be configured for local currency pricing (SAR/AED/EGP)
• Stripe enterprise accounts can support 17 currencies for billing in the Middle East

2. Fraud prevention

• Simah system validation of Saudi IDs
• Forter Risk Control System customises rules for Middle East

3. Checkout optimisation

• Arabic language interface is mandatory
• OTP SMS verification process simplified (average Arab user abandonment rate is 271 TP3T higher than in Europe and the US)

IV. Cost control recommendations

1. COD Management Fee Negotiation Techniques:
   Signed step agreement with logistics provider, monthly order quantity >5000 can be pressed to 3%-5% (average market price 6%-8%)

2. BNPL Rate Comparison:
   Tamara charges cross-border sellers 4%+$0.3 vs Tabby's 3.5%

Typical case: A Shenzhen household DTC brand increased its Saudi Arabia conversion rate from 11% to 23% and COD rejection rate to 12% (industry average 18%) through the combination of "Checkout.com+SADAD+Fawry".

V. Advanced Strategies for Dropshipping Payment Solutions in the Middle East

1. Localised payment gateway options (breakdown by country)

Payment habits vary significantly from one Middle Eastern country to another, requiring targeted access:

2. COD optimisation programme (reduction of rejection rates)

Cash on delivery still accounts for as much as 40-60% in the Middle East, but rejection rates could reach 15-25%. optimisation methods:
✅ Pre-authorisation verification:

• Shopify plug-ins such as [COD Verification] to confirm the authenticity of the order via SMS
• Aramex Offers "Smart COD" Service with 50% Deposit to Reduce Risks

✅ Logistics co-operation negotiations:
Ladder agreements with Naqel (Saudi Arabia), Aramex and others:

Monthly unit volume <1000 → COD rate 8% + $2/unit  

Monthly unit volume >5000 → COD rate 4.5% + $1/order

✅ Client Filter.
Add a reminder to the checkout page: "COD orders are subject to a 10 SAR deposit (refundable upon receipt)" to filter out 30% non-bona fide customers

3. BNPL Compliance Operations Techniques

Middle East Islamic finance law requires instalments to be interest free, operational points:
🔹 Selecting a Compliant Vendor:

• Tamara (Saudi Arabia's largest, supports 4 interest-free instalments)→ Official Website Direct Integration
• Tabby (UAE mainstream, "try before you pay" feature for fashion category)

🔹 pricing strategy:
Labelling the product page with "Pay in 4 instalments, each instalment is only XX SAR" is more effective than simply reducing the price - measured to increase conversion rate by 18% (Source: RedSeer Consulting Report)

Six, [combat cases] Shenzhen electronic parts seller optimisation path

Background: Originally using Stripe+PayPal, the abandonment rate in Saudi Arabia was 68% (mainly due to the lack of SADAD and COD options). Adjusted programme:

Phase1. 

Connected to Geidea (SADAD) + contracted to Aramex Smart COD → Conversion rate ↑21%



Phase2.

Add Tamara staging display → AOV from $45 → $67 (+49%)



Phase3.

Fawry enabled to process Egyptian order → COD rejection rate down to 9%

Resulting in a GMV growth of 3,40% in 6 months and a net profit margin of 29% (industry average ~17%)

VII. Guidelines for avoiding pitfalls

⚠️ Religious sensitivities :
Avoid the word "Interest" on any payment page. For example, PayPal's instalment option needs to be turned off.

⚠️ Licence requirements :
UAE Central Bank regulations - 12 consecutive months of transactions >2.5 million AED are required to apply for a PSP licence. It is recommended to initially process through a licensed gateway such as Checkout.com.

⚠️ settlement cycle :
Some banks in Saudi Arabia are slow to clear (WPS Payroll System prioritises the channel) and it is recommended to choose a gateway that settles weekly such as Tap Payments rather than monthly.

Recommendations for next steps:
1️⃣ [test tool] with theSandbox environmentSimulation of the Arabic checkout process
2️⃣ [Logistics Docking] Contact Aramex for the latest COD quotation form: [Area Manager Email Template] (
mailto:[email protected]?subject=Request for Dropshipping COD Rates&body=Hi Team...)
3️⃣ [Competitive Analysis] Install SimilarWeb plugin to see payment methods used by competing pairs